Xerox Corp. (XRX) to Split into Two Companies, Reports 4Q Earnings

Shares of the Xerox Corporation (XRX) were up +0.05 or +0.54 percent to $9.28 in Friday’s premarket after news that the company would split into two separate entities. In addition, Xerox announced better than expected earnings for its fiscal fourth quarter this morning. Xerox shares closed at $9.21 per share, down -0.02 or -0.22 percent in Thursday’s regular trading session.

Founded in 1906 Norwalk Connecticut based Xerox Corp. started up as “The Haloid Photographic Company” in Rochester, New York, a manufacturer of photographic equipment and paper.

In 1938, physicist Chester Carlson invented a process for printing images with an electrically charged drum and dry powder toner, which was developed by Xerox as a commercial product that later became the modern copy machine. Today, the company is a major manufacturer of a wide variety of office printers and other office equipment.

In the 1970s, the company invented several devices at its Palo Alto, California research facility that would later become standard elements of personal computing: the computer mouse, the desktop metaphor Graphic User Interface or GUI and desktop computing. The developments were not appreciated by management at the time, which ordered Xerox engineers to share the features with technicians from Apple (AAPL) Computer. The features were also subsequently adopted by Microsoft (MSFT), becoming standard equipment in all personal computers. In 2010, the company acquired Affiliated Computer Services for $6.4 billion.

Xerox announced earlier today that it would split into two companies, a $7 billion business services company and an $11 billion document technology company. In addition, Xerox announced a three year restructuring program with expectations of saving as much as $2.4 billion. The separation of the two companies is expected to be completed by the end of this year.

Xerox Chairman and Chief Executive Ursula Burns said in a statement that, “Today Xerox is taking further affirmative steps to drive shareholder value by announcing it will separate into two strong, independent, publicly traded companies. These two companies will be well positioned to lead in their respective rapidly evolving markets and capitalize on the opportunities that now exist to expand margins and increase market share.”

After acquiring an 8.1 percent stake through several of his investment funds at the end of last year, billionaire Carl Icahn became the company’s second largest shareholder. Icahn successfully campaigned last year for the separation of PayPal and will get three seats on the board of the outsourcing company, which is a large part of the Affiliated Computer Services unit the company bought in 2010.

Burns continued, “We are pleased to have reached an agreement with Mr. Icahn that ensures that we will have strong leadership and best-in-class governance for the new Business Process Outsourcing company that will be created by our separation plan”.

Also this morning, Xerox announced fourth quarter adjusted earnings of $0.32 per share on revenue of $4.7 billion. Analyst expected the company to earn $0.28 per share on revenue of $4.74 billion. Revenue for the quarter was off -5 percent on a constant currency basis, while equipment sales declined -10 percent to $770 million and document technology revenue fell -13.1 percent to $1.877 billion.

Xerox stock has been steadily declining, with a loss of over -34 percent in the last twelve months. This morning’s premarket action has seen the stock’s three percent gain dwindle to less than one percent, indicating the market is not overly impressed with the news.

Company earned 79 cents per share in its latest quarter compared to 69 cents one year ago.

Published on Jan 29, 2016

By Jay Hawk

Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.